Pension parishad and the proposed universal pension scheme

by plainspeak

I was reading the newspaper in the morning and I saw an article. It was about the plans of a few elderly to stage a dharna in New Delhi. My interest was piqued after reading the first few lines. Forgetting that I had to go to office, I started to examine the article in detail.

It started like this:

About 5000 elderly people will stage a dharna at Jantar Mantar here from May 7 to May 11 demanding universal old-age pension for all those above 55 years.

What the fuck right? 55 years and old age? I read on.

They are mobilized by social rights activists under the banner of Pension Parishad.

I had not heard of this organization before. Anyway, it continued:

Co-conveners of the parishad Aruna Roy and Baba Adhav, who launched the movement in Pune on February 1, said the changed socio-economic scenario and the rise in longevity had added to the disadvantage of the elderly people in the unorganized sector.

Aruna Roy!!!, the member of the NAC, the Indian equivalent of the Communist politburo, who research on which policies would fetch the most votes in the next elections. I got tense. The article went on:

While on the one hand their lifespan had increased, elderly people no longer enjoyed the protection of their wards and other relatives and were now required to fend for themselves. Their physical condition did not even allow them to collect water from wells or hand pumps, let alone earn a proper living.

What generalizations! There’s nobody in India who looks after their parents. So, the state will look after them. All the elderly of India. Utopia!!

Social activists Subhash Lomte, Annie Raja, Ravi Srivastava and Prabhat Patnaik said it was time the state provided some relief in the form of monthly pension of Rs. 2000 to such people.

Ya, it is time we did it. The roads of villages and cities are filled with rotting bodies of neglected old people. Now we can give them money, just 2000 rupees per person per month. For all the old people of India. In return for nothing.

The demand is for a non-contributory pension to those above the age of 55 while the eligibility for women should be 50 years without any distinction on the lines of BPL and APL. For other vulnerable groups, the age of eligibility should be pegged at 45 years.

Oops!. Non-contributory pension. How about I sit at home and get a non-work salary.And the definition of old age drops to 50 for women and for vulnerable groups, to 45. Yes, if a person from an *invulnerable* group gets arthiritis when aged 55, a person from a *vulnerable* group will get it at 45 itself.  And Rahul would be an old aged man 4 years from now if he was from a vulnerable group. Today, it will be the elderly who will get paid in return for nothing. Tomorrow, it will be some other group. Day after tomorrow, another. In the end, the govt will pay everyone. Would you still be calling the country a democracy then? The tragedy is that the individuals are no longer the basic units of our society. Different caste groups are.

According to the parishad, those above 60 years accounted for 8.2 per cent of the population —10 crore people — and in their estimation, the state would have to bear about Rs. 3.6 lakh crore a year after excluding 10 per cent of the elderly individuals. They hoped the Centre would bear 75 per cent of the outgo — that is Rs. 2.7 lakh crore.

Small amount really. 2.7 lakh crores. Why don’t you take a few lakh crores more, help yourself. We’ve lots.

They proposed a cess on the industrial sector to raise the needed funds and provide relief to the government.

Ah. Orgasm. The solution to all problems. Taxation. Of the productive.

The article ended with:

The Centre pays Rs. 200 as pension to those above 60 years and Rs. 500 to those above 80 years, covering only 1.87 crore BPL families.

Anyways, a few days later, while browsing, I came across an episode of “Face the Sagarika Nation”. There were four participants. Two sympathetic to the proposed universal scheme and two against it. But, among the four, the main ones were Gurcharan Das, against the scheme and Nikhil Dey, the one manufacturing leading the protests. You can see the video. It really captures the thinking of the Govt-has-to-do-everything activists. The main points which caught my eye were:

  • Nikhil Dey at around 6:02 says “Elderly are our main national concern“. Really Mr Dey?. You realized this on Feb 1, 2012? So, first it was NREGA, next came Food Security and Communal Violence Bills and now the Universal Pension Scheme. Our NACtional concerns change very fast.
  • Sagarika at one point says “There can be no moral disagreements with the scheme“. Believe it or not Sagarika, many have. I have listed in Appendix A the disagreements some people have with such schemes and such thinking.
  • Gurcharan Das tells others that the developed countries thought about social security only after 200 years of sustained development. And he says he is amazed that this issue is being brought out now, when the country is facing an economic crisis. He sarcastically asks why they are stopping at 2000 Rs, why not 2,00,000 rupess? He says he would support as a real exception an universal health insurance scheme since it would be tangible. He says that we need to build a culture where people have to work and there is growth and not create fake jobs and entitlements. When Gurcharan Das says “fake jobs” you should see Nikhil Dey’s face.
  • Now Nikhil Dey responds that these people have worked all their life without entitlements, without subsidy and now this is like a payback for them. No entitlements and subsidy? This is an absolutely untruthful argument. He says that we should have made sure that they had pension.When another panelist says we should force people to save, Nikhil says that instead of that why not take a portion of the growth and give it to the elderly.I have listed in Appendix A reasons given by a veteran psychiatrist as to why people like Nikhil Dey thinks this way.
  • Sagarika asks Gurcharan to counter the fact that the scheme would take *only* 2 percent of GDP and will that make such a big difference to fiscal deficit. Sagarika shows her financial illiteracy by asking such a question. This question doesn’t get a response because of a break. Well, Sagarika, here is the response. A snippet from an article.  “In his budget speech last fiscal, Pranab Mukherjee had set a fiscal deficit target at 4.6% of GDP. He missed it by a huge margin — the actual number was 5.9%.” So, Sagarika, 2% does make  such a big difference. Also listed in Appendix B is the danger of overshooting the fiscal deficit.
  • Next, Gurcharan Das says that a country should not live beyond its means and gives example of Brazil which he said had to face a few missed economic decades because of profligacy. And tells them that for every one percent reduction in the GDP growth rate, 1.5 million jobs are lost. Nikhil Dey shakes his head. Another classic moment.
  • In the melee Nikhil Dey tells that Brazil has universal pension, and South Africa ….(interrupted in the melee). Gurcharan counters that Brazil has a far higher income. Then Nikhil Dey ends: “Can we afford to let our elderly die without concern?” with what looks like some moisture in his eyes. The state of schemes in Brazil and South Africa are listed in Appendix C.
  • Sagarika comes up with no conclusion and just summarizes that it is “entitlement vs concern for elderly” and says parties need to put something for the elders in their manifestos.

After this video, I didn’t give much notice to this issue until today, when writing this blogpost. I did a google search today for “Pension Parishad” and these articles came up in the results.

So, the day might not be far when the benevolent Ms. Sonia Gandhi will ask order the PM to create this scheme. *If* we allow her to get away with this.

Appendix A:

Snippets from article on a book by a psychiatrist, yes a psychiatrist, Dr Lyle Rossiter.

A social scientist who understands human nature will not dismiss the vital roles of free choice, voluntary cooperation and moral integrity – as liberals do,” he says. “A political leader who understands human nature will not ignore individual differences in talent, drive, personal appeal and work ethic, and then try to impose economic and social equality on the population – as liberals do. And a legislator who understands human nature will not create an environment of rules which over-regulates and over-taxes the nation’s citizens, corrupts their character and reduces them to wards of the state – as liberals do.

Dr. Rossiter says the liberal agenda preys on weakness and feelings of inferiority in the population by:

creating and reinforcing perceptions of victimization;

satisfying infantile claims to entitlement, indulgence and compensation;

augmenting primitive feelings of envy;

rejecting the sovereignty of the individual, subordinating him to the will of the government.

The roots of liberalism – and its associated madness – can be clearly identified by understanding how children develop from infancy to adulthood and how distorted development produces the irrational beliefs of the liberal mind,” he says. “When the modern liberal mind whines about imaginary victims, rages against imaginary villains and seeks above all else to run the lives of persons competent to run their own lives, the neurosis of the liberal mind becomes painfully obvious.”

Appendix B:

Budget Deficits and National Debt by Martin Feldstein, a talk delivered in Mumbai.

Unfortunately, it is easy to ignore budget deficits and postpone dealing with them because the adverse effects of budget deficits are rarely immediate. Fiscal deficits are like obesity. You can see your weight rising on the scale and notice that your clothing size is increasing, but there is no sense of urgency in dealing with the problem. That is so even though the long-term consequences of being overweight include an increased risk of a sudden heart attack as well as of various chronic conditions like diabetes. Like obesity, government deficits are the result of too much self-indulgent living as the government spends more than it collects in taxes. And, also like obesity, the more severe the problem, the harder it is to correct: the overweight man has a harder time doing the exercise that could reduce his weight and the economy with a large deficit and debt is trapped by increasing interest payments that cause the deficit and debt to rise more quickly. I emphasize the analogy to stress the point that budget deficits need attention now even when their adverse effects may not be obvious.

Appendix C:

Article in “The Economist” on the results of the pension scheme in Brazil.

The price for such distorted priorities is already high. But soon it will be unpayable. Payroll taxes for pensions are already greater in Brazil, at 32% of gross salary, than in all G7 countries except Italy. According to Bernardo Queiroz of the Federal University of Minas Gerais, without reforms, by 2050 they would have to reach a crushing 86% to keep the system going.

Averting such a disaster will take big changes: more people contributing, less generous pensions and a ban on early retirement. Rerunning his calculations, Mr Queiroz found that, together, these would cause the pensions payroll tax in 2050 to rise to 40% (still a daunting figure). But such reforms are not even being discussed. “It’s a puzzle,” he says. “The unions are against changes. But without them, the workers they represent are paying for other people to get much more generous pensions than they will ever get themselves.”

Some very good comments on the same article.

Recent democratization also had given Brazilian politicians access to the public purse and the possiiblity of buying off elections with unfunded “rights” and “benefits”. Brazil did not stand a chance.

This post makes a case for the importance of continuing economic growth in Brazil – not a case for the continuation of this excessively generous pension scheme. On average everybody is poorer in Brazil than in France and other developed countries thus Brazil should not try to directly compete with rich countries on pension generosity as this would be unjust, a case of robbing Peter to pay Paul. Except in this case Peter is a child in poverty or a worker and Paul is a 50 year old retired on full pay. It is also true that paying so many able-bodied people not to work is economic suicide, which returns us to my first statement – Brazil must focus policy on economic growth.

In this South African govt webpage, you can find that the scheme in South Africa is not universal.